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AUSTIN, Texas — Schlotzsky's Inc., a delicatessen franchiser with more than 500 outlets in 36 states and six countries, filed on Tuesday for protection from its creditors under Chapter 11 of the federal bankruptcy laws.

Schlotzsky's said operations would continue normally during the financial restructuring. The Austin-based company owns 21 shops while franchisees own 492 stores.

The restaurant chain reported a net loss of $11.7 million in 2003 versus a loss of $199,000 in 2002. It lost another $671,000 in the first quarter of 2004. In July, the company announced it was cutting 20 percent of its corporate staff and closing 15 company-operated shops.

"It became apparent to our board that this action was necessary to protect Schlotzsky's from millions of dollars in claims, judgments, and debts accumulated during the past few years, while enabling us to restructure the company," Sam Coats, Schlotzsky's president and CEO, said after the filing was made in U.S. Bankruptcy Court in San Antonio.

"I believe the actions taken by the board took great courage and are clearly in the best interest of the company," Coats said.

Schlotzsky's reported liabilities of about $71.3 million and assets of approximately $111.7 million, including approximately $64.8 million of intangible assets, according to the court filing.

Schlotzsky's will ask the bankruptcy court to issue a sale order that would allow the company to sell nine pieces of real estate to Westdale Asset Management, Ltd., an affiliate of Schlotzsky's largest shareholder, for approximately $3.4 million. With the sale, the company would have an additional source of liquidity for its operations over the next few months, a company news release said.